Retirement isn’t just about reaching a number; it’s about turning your savings into a paycheck that lasts. In this episode, we explore how investing changes as you approach and enter retirement, the risks that can derail a plan, and strategies that can help you stay on track. If retirement is on your horizon, this is an episode you won’t want to miss.
Episode Transcript
Intro/Closing 0:02
Welcome to the Real Talk Retirement Show, where we explore the financial side of retirement and beyond. Whether you’re currently retired or planning for the future, we offer real, relatable conversations about money and personal finances. Most importantly, we dive into all these topics using Real Talk. Now, let’s get real about your money and your retirement.Brian Graff 0:44
And today we’re talking about how to best invest your money as you get close to retirement. And just as importantly, what you should change once you actually retire. You know, most people think retirement is about hitting a number. For example, you know, having a million dollars saved up. But in reality, it’s more about what happens next, how you turn that number, you know, whatever your number may be, into a paycheck that lasts the rest of your life.Tracy Burke 1:12
Yeah, and that’s such an important uh concept, of course, Brian. And and maybe tying in a visual. I think, you know, a lot of times if we help visualize some certain things, that might be helpful. You know, imagine, you know, that obviously many people spend decades working and think of it like a mountain, you know, you’re as your working career climbing up that mountain, and that peak of the mountain at the very top, uh I sometimes you know think of uh of um like comics or something like that, where they have that really sharp, pointy uh you know, top of the mountain, not the nice you know curvature uh that goes on forever, but that that that real peak of the mountain is really representing your retirement. And and that’s of course that moment when you switch from saving to now having to take money out of your portfolio really to live in. And and and once you reach that peak, now you need to focus how to get down the other side of the mountain safely. Um, so you know, as you’re coming up to the peak in the mountain, you think in in cartoons like they’re running fast and all of a sudden they run off the very top of the peak and their legs are gone and they’re midair and then they start coming crashing down and whatever, like that. Of course, you know, in the retirement mountain, you probably as you get close to the top of that peak, maybe you start slowing down a little bit. So you’re coming down cautiously, right? So your feet start to really, you know, gain traction and so forth like that. You’re probably gonna start slowing down as you go down uh that peak. And then once you’re comfortable and you get there, everything’s uh okay. But again, uh again, the prudence is probably to ease into the top of the mountain as as that life changes. And again, all things we’re gonna explore in today’s episode. So, Brian, I think you have a story that you want to kick us off with
Tracy Burke 2:56
today.Brian Graff 2:56
I do, Tracy. You know, we love our we love our stories to paint a picture. So let’s uh let’s rewind, shall we, back to 2008. I know most of us investors would rather not, but but let’s do it anyway. Let’s humor me. Um, and we’ll talk about a couple. I’m gonna call Mike and Susan. They did everything right, they they saved money for decades. They built a portfolio of about $1.8 million, paid off their house, and retired feeling confident, as they should. And that’s a big number they were able to save. But just a few months into retirement, the market dropped. And, you know, wow, did it did it ever drop? Yeah. Suddenly, you know, everything felt different. Not because their plan was broken, but because for the first time they weren’t contributing to their accounts anymore. They weren’t saving, they were taking money out. And every headline felt heavier. Every statement they received uh from the custodian felt more personal. So they started asking questions like Should we go to cash? Uh, what happens if this keeps going? Are we gonna be okay? Normal questions to ask. And that’s the moment that defines retirement for a lot of people because you know, retirement isn’t just about having enough, it’s about having a plan that you can stick with when things get uncomfortable. So, again, today we’re gonna talk about how to invest in a way that not only works on paper, but actually works in real life.Tracy Burke 4:16
And what you described with Mike and Susan there, that that is a very, you know, common situation, right? And so from that financial perspective, you know, that actual sort of moment of almost flipping the switch, so to speak, that can be really tough for many people and for many reasons and and sometimes different reasons. But again, shifting from that accumulation phase to the distribution phase. And again, that’s really tough for most. So if if we sort of focus starting on the accumulation phase, we often have that mindset. Well, how much can it grow or can can you know the portfolio grow? And and sometimes we’re often quite aggressive with our portfolios and looking for that next apple or whatever is out there, and and we’re in sort of that maximizing growth uh phase, right? Then as I mentioned, we hit that switch and begin taking money out of the portfolio. And all of a sudden, you know, typically, as I mentioned with that example of going up the mountain, we want to become a little bit more cautious and maybe a little bit more preservation mode, uh, at least initially, and figure out how to most effectively create that retirement uh paycheck. So we often wonder, just ask ourselves the question, you know, how do I not run out of money? Of course, that’s something that, you know, for some folks that that’s uh the the number one question or what keeps us up at night. Uh but again, it’s not usually advisable to make a quick change. Uh, and again, that visual of climbing the mountain, you know, gradually slow down a little bit uh so you don’t go flying off that very top, like we talked about. Uh and then on the way down, though, you gain your footing, as I mentioned, and traction. And hopefully then you have smooth sailing and you’re sort of set uh the rest of the way out.Brian Graff 6:05
Yeah, it’s also important to remember, Tracy, there’s often a big shift that happens here. So while you’re working, you know, mistakes can be fixed with time, maybe extra savings, future income. But once you retire, you know, you lose one of your biggest assets, which is your paycheck. And that means your portfolio really has to start doing a different job by kicking in and providing that reliable income stream.
Brian Graff 6:29
All right. So let’s uh now talk about some key risks that can happen and affect the beginning of your retirement. What do you have for us, Tracy?Tracy Burke 6:37
Yeah, so I would say the first one is is called what we call sequence of returns risk. And it basically means this you know, if the market drops early in your retirement while you’re taking withdrawals, depending on the level of risk in your portfolio. And again, we would define that as mostly the amount of stocks versus bonds, of stocks being, of course, more risky, uh, it can permanently damage your portfolio if, again, the stock market has a decent decline early on. Uh, and that’s even true if the markets can recover later. There’s a period of time. Uh, if we rewind uh the sequence of returns risk, it was very real for a number of people uh back in the great financial crisis back in 2008. Now, if if you’ve saved enough, uh you’re in very good track to retire, you have that diversified portfolio, and I would say a reasonable asset allocation, you’re likely just going to be fine. But the sequence of returns risk uh sort of retiring at the wrong time, and it’s tough to prevent or know what you know if that would happen. Uh a couple other risks here, uh, to just briefly discuss is longevity risk. You know, some people live a heck of a long time and some people spend 30 years or more in retirement. So you, of course, we’ve talked through that before. You want to uh make sure your your assets last through retirement. Uh inflation, you know, a period there’s period of time and and and right now, as we’re recording this in mid-2026, there’s a little bit of a of a bump in inflation. And you know, it’s certainly a real thing for a lot of people. But periods of high inflation can certainly mean those dollars just don’t stretch as far as they used to. And then uh I would say maybe the last uh risk that comes to mind, Brian, at this point is is the behavioral risk. Right. Um now, sure none of our listeners would ever do this, but you know, some folks tend to hit that panic button when the markets aren’t doing so well, and sometimes can make some really dumb financial decisions that we’ve seen, right, Brian?Brian Graff 8:53
Human nature, right? It’s not it’s not your fault. Trust me, I get it. Uh, we all tend to panic about things from time to time. But one way to kind of combat this behavioral risk is to is to work with a trusted advisor who will take a long-term view for you and will hopefully convince you to take that deep breath that’s necessary and really think twice about making any of those emotional decisions. So it’s great to have someone on the sidelines there with you, helping you every step of the way. Yeah. Uh, so
Brian Graff 9:21
now that we know what to look out for, some of those risks, we often ask ourselves the question what adjustments should I make to my portfolio? And you know, we discussed potentially slowing down, of course, near the peak of that mountain, Tracy, in asset allocation terms. You know, and if you’re overly aggressive, if you’ve had 90, 95% of your money in the stock market, for example, you certainly may want to begin downshifting in the years leading up to, you know, moving into that distribution phase. And this, of course, all depends on your risk tolerance, your income needs, and other unique items to you. Remember, we’re not all the same. And this is something an advisor can help you determine. Uh, some listen listeners out there are likely familiar with what’s called target date retirement funds, which are all in one kind of options, uh, portfolios with a predetermined mix of stocks and bonds, really for the average investor at certain age points. Most of the big fund companies have these, uh, and they use what we call a glide path, right? Which is a basically a gradual reduction of the stock exposure in your portfolio the older you get, right? Um, or or the closer you get to that retirement date. This can make sense for lots of people. And depending on your situation, maybe it doesn’t, but it is a very common strategy, that glide path approach that really enforces slowing down slowly but surely as you get closer to the peak.Tracy Burke 10:47
Yeah. And to go along with that, you know, we certainly do believe it’s important to have that a mix of stocks and bonds in your portfolio. And as you’re talking about, you know, the glide path and that mixture and becoming that, uh, but stock exposure is important uh to have, especially including during during the retirement uh standpoint. Uh an old rule of thumb that that most have heard before, and it sort of morphed over time, but it’s sort of a rule of thumb is if you take the number 110 and then subtract your age, often that’s you know, sort of the middle of the road stock exposure that you have. So if your age, you know, 105, um, you know, you subtract that from 110, and maybe you should have 5% in your portfolio. All right, Brian? Yeah, yeah.Brian Graff 11:35
Not quite there yet, Tracy.Tracy Burke 11:36
Okay. All right. So uh so diversification again, important. Uh, both stock and bond exposure. Uh, and again, that’s because when the stock market is down, and think about it, on average, that happens every third or fourth year when we look at the statistics. Uh, so during those downturns, you can then take distributions from the bond side. Uh, if you’re predominantly in stocks, and we see that sometimes. And do you make typically more money in the stocks than you do bonds? Yes. But does that mean you should be 100% in stocks? No, for most people, right? Uh, but if you are predominantly in stocks, you just lose that flexibility and and it becomes tougher. And you often end up having to sell from stocks at one of those downturns, just to provide the income that you need. So uh something you mentioned about, you know, an advisor. I would say that a good advisor will have some type of a dynamic strategy and and and really from you know, selling from those positions, you know, depending on what’s happening in the market. So when stocks are doing well, often that’s where you should be selling from. When stocks are down, you should be selling from bonds. So that dynamic strategy to to switch back and forth. Um, for for do-it-yourself investors, that’s not such an easy thing to do, but a good advisor will be doing that. So, yeah, again, I would say that that’s super critical. And again, a broad diversification is important for another reason. Um, another strategy that comes to mind and or another approach really is what we sort of refer to as the bucket strategy, uh, where you put a portion of your portfolio in safer assets really to cover near-term spending. Uh, so you know, for example, uh, you know, some folks will say, I want to have enough in cash to provide my next two years of income. And then for income I need between years two and 10, I want to put that in a bond bucket, so to speak. And anything I I won’t need to touch for the net, you know, for beyond 10 years, let’s put that in a stock portfolio. So there are a lot of variations on this, but you know, different buckets. Um, and you know, sometimes it makes sense and sometimes it doesn’t. And generally a diversified portfolio might have some buckets within that portfolio, and you could sort of make that argument. Well, yeah, you you do have 10 years of of money in bonds or in cash sitting out there. So a lot of variations on it, and again, not a one size fits all.
Brian Graff 14:17
For sure. And as we said, Tracy, it may be important for sure to shift gears as you approach retirement itself. Uh, you certainly need to do some planning around how you’ll create that income in retirement. What will your withdrawal strategy be? What about Social Security? Do you plan on taking it early at 62? Do you want to wait till 70? You know, there’s not a perfect answer for everybody. You really have to explore that personally and work with your advisor and making that determination. And, you know, how will taxes affect it all? So a lot, a lot to think about. And that’s a completely different episode because it is a lot to think about. And we’ll make sure to put that on our list, Tracy, to take a deep dive at some point. Sound good? Yeah. Yeah. Yeah. But those, but those first few years of retirement are extremely critical, though, Tracy. And what are a few mistakes that you often see when working with your clients?Tracy Burke 15:06
Yeah. So so I would say some of the mistakes we see, one is being too aggressive, and and just talked about that a little bit and basically not having any or enough bonds in the portfolio. Now, you know, as individuals, we have a lot of biases, right? And studying the psychology behind some of these, uh, one of those biases is called a recency bias, and it’s what it sounds like, right? You know, what’s happened more recent uh takes a little bit more uh, you know, uh in terms of our brain power and so forth, and that’s where our thoughts go. So uh as we said, we’re in mid-2026 as we’re recording this. The last three, three and a half years of the investment market have been really tremendous. It’s been fantastic, but it won’t go up forever. But again, some people are like, markets have been doing great, and you know, that recency bias leads us to think it’s gonna continue being that way. But yeah, you know, it’s not always gonna be that way. So that’s a mistake sometimes being too aggressive. Then on the flip side of that, uh, another mistake is sort of being too conservative, right? Uh, just the opposite, not having any or enough stocks in your portfolio, and whether it’s sitting in cash waiting for that buying opportunity or just scared what is going to happen in the market, uh, that’s also a mistake we’ll sometimes see. Uh over concentration risk in just having a few positions or or lack of diversification. Yeah, you know, some of whether it’s tech stocks or some AI positions or other positions over time have done really well. But you want to be diversified, and some people are can be very overconcentrated in just, you know, maybe 20, 30, 40, 50% or more of their portfolio is in one position. And when I say one position, like one security, um, you know, a lot of people have 20, 30, 40, 50% in the SP 500 index. That’s diversified. We’re talking about, you know, 20, 30, 40, 50% in Apple or Nvidia or Google or whatever the name is. Um, normally, you know, that can lead to some some trouble at some point. Um, other items, you know, uh thinking through mistakes, uh, you know, you you mentioned it a little bit before, you know, the tax element, uh, ignoring taxes and just how they’ll impact the income stream. So trying to come up with uh a tax efficient and a prudent income stream, figuring out taxes is important. Uh healthcare costs, something else. Ignoring healthcare costs, another mistake that we’ll sometimes uh see and not properly planning for them. You know, healthcare costs a lot of money, and you just need to make sure you have a good plan in place of how you’re going to do that, especially as you age. And then sort of wrapping this all together, it’s you know, uh a mistake is not planning for any of it, right? And not having a plan. Um, sort of makes me think of that old Ben Franklin quote, you know, he who fails to plan plans to fail.Brian Graff 18:11
So true. So true, Tracy. Yeah, the healthcare cost is a huge one, by the way. If I back up a little bit, when I talk to retirement plan participants every day, they’ve got this vision of, you know, I’ve saved pretty well for retirement. I’m gonna get out, go out at 62 or 63 a few years before Medicare kicks in. And then when they go out in the open market and they look at healthcare costs, they’ll call back and say, you know what, maybe I will work till 65. It’s amazing how often you have those conversations.Tracy Burke 18:34
Absolutely.Brian Graff 18:35
Yeah, but besides like reassessing and possibly adjusting your risk tolerance, which is so important, you know, you could also consider taking slightly lower withdrawals during those very early retirement years just in case of market downturns, or at least have the flexibility to do so. Remember, it’s all about being flexible. Uh, therefore, you know, you could enter retirement with an extra cash buffer, which really makes sense for a lot of people to protect against those market downturns.Tracy Burke 19:01
Yeah, absolutely, Brian. And and I know that that we’re both baseball fans, and along with our our producer Zach, who all we always want to give a shout out to. He’s he’s always behind the scenes. He he has a voice for radio, is is apparently what that is. But yeah, um, you know, it’s uh, you know, since but since we’re in the heart of baseball season, want to use a baseball analogy, if that’s okay, Brian. Yeah, love it. Let’s go. Okay. So investing in retirement, you know, it’s really not about hitting home runs anymore, right? Uh, maybe back in the days when you and I were younger and on a little league diamond or high school diamond, you’re swinging for the fences, right? But most of us should not try to swing for the fences, you know, especially if you’re properly prepared in a sense for retirement. But engaging in that consistent, disciplined approach and just making sure your money is there when you need it. So it’s more about not swinging for the fences and home runs, but maybe sort of more of you know, bunts or you know, singles and doubles butting their runs around and and consistently uh putting some runs up on the board.Brian Graff 20:02
Which is a lost art, by the way. I love that baseball analogy, but I’d love to see more major leaguers actually take this advice. Seems like everybody’s swinging for the fences, Ethan Stracy. Very true. In a baseball sense. Yeah.
Brian Graff 20:13
So anyway, let like always, you know, let’s uh let’s finish up with some action items for our listeners. And these are meant to be, you know, tangible things that you can do leading up into your retirement that may be beneficial for your situation. However, again, it bears repeating. It would certainly be worth speaking with a trusted professional before you jump into these items.Tracy Burke 20:32
Yeah. So the first one comes to mind is is asset allocation and just simply revisiting it. Uh, asset allocation again simply means how much in stocks, typically how much in bonds, maybe cash is part of that mix as well. But just figure out what is your sweet spot and and what should that approach be, especially as you get closer and into retirement. Uh, just make sure you’re not too aggressive or too conservative on on the other end, too. Uh figuring out that withdrawal strategy. We talked a little bit about that in today’s episode, and and determine which one you will use and and just make sure you have enough to preserve you know provide that desired income and which sources it’s coming from. Uh and then taxes, we talked about taxes, healthcare cost, uh, you know, and just overall flexibility into your spending routine, uh, if you can do it and just planning for for those. But you know, finally, I would just say, you know, and this one’s gonna certainly sound familiar, have a plan. Don’t wing it, right? This is way, way too important to wing. So you need to plan for a successful retirement.Brian Graff 21:38
Very, very true, Tracy. Great stuff again today. And that that’s a wrap on episode 18 of the Real Talk Retirement Show. Uh, please remember to reach out to us anytime with questions or comments. You can reach us at podcast at conradseagle.com. We are here to help. We truly love to help folks out. And please do remember to share this podcast with your family, your friends, your coworkers, and you know, give us a five-star review if you’re so inclined, and subscribe if you haven’t already. So thanks so much, everyone, for staying with us on your journey to and through retirement. And we’ll see you next time on the Real Talk Retirement Show.Intro/Closing 22:15
Thank you for tuning into today’s show. The Real Talk Retirement Show is created and produced by Conrad Siegel, an advisory firm that specializes in helping people prepare for retirement and beyond. If you want to learn more about our work or meet the team, you can visit conradsegal.com. Information on this show is for educational purposes only and should not be considered personalized investment, tax, or legal advice. Before making decisions, you should consult with the appropriate professionals for advice that is specific to your situation.